What Skills Lead to Entrepreneurial Success? Evidence from Non-Farm-Household Enterprises in Indonesia

Policy Research

The abundance of small enterprises in developing countries has led to debates regarding the role that of entrepreneurial skill in business performance. Analyses of the skills and characteristics important for success can inform entrepreneurship training programs or educational curricula designed to increase the number of successful entrepreneurs. We addressed these issues in the context of Indonesia, a low-middle-income country in which almost half of workers are self-employed. After developing a conceptual framework linking fluid intelligence, crystallized intelligence, and educational attainment, we estimated the effect of these different types of intelligence on the profit and value of non-farm-household businesses. We found that fluid intelligence had sizeable and positive returns on business. On the other hand, crystallized intelligence had a positive and large effect only in sectors that required intense concentration or computers. Some heterogeneous effects regarding business size were also found. Our results were robust when we controlled for possible selection into nonfarm entrepreneurship.

Research Area 
National
Keywords 
cognitive skills
human capital
entrepreneurship
household firm
farm business
non-farm business
Publication Type 
Working Paper
PDF icon Download (1.05 MB)

Share this page